This judgement provides further insight into the limits of permissible commercial benefit that can be obtained through trial or experimentation before the priority date of a patent. The interpretation of what is deemed reasonable trial and experiment also has relevance for prior public use. We examine how the defence of “use for the purpose of reasonable trial or experiment only” was interpreted in this decision.

Relevant facts

Lynx filed a provisional application for a bulk material container for use as a rail wagon on 30 March 1998 and a complete application on 30 March 1999. It was held however, that new matter was added to the claims thereby post-dating the priority date to 30 March 1999. The fallout of this was that it also put use of the invention before this later date under scrutiny.

Following the provisional filing, Goninan −Lynx’s manufacturer of prototype wagons− entered into a contract with BHP (with Lynx’s approval) for trial and evaluation of three prototype wagons on 4 September 1998. The prototypes were supplied to BHP from 17 December 1998 to 17 January 1999, before the post-dated priority date. If the trials were deemed successful by BHP they would then pay for the prototypes. Lynx and Goninan had also entered into a royalty agreement. Following evaluation, BHP purchased 109 wagons in addition to the prototypes.

Bradken opposed Lynx’ patent application, and the Australia Patent Office decision was appealed to the Federal Court. An issue for consideration by the court was whether secret use could be brought as a new ground of opposition against Lynx. Secret use was only made available as a ground for opposition following amendments to the Patents Act 1990 as a result of the US Free Trade Agreement Implementation Act 2004. This came into effect after the original opposition hearing in the Patent Office. While McKerracher J held that it was not open for Bradken to rely on secret use as a new ground for opposition, he nevertheless proceeded to consider whether Lynx had engaged in secret use of the invention. While no binding precedent is set, the judgement does provide a welcome judicial opinion.

Reasonable trial or experiment only

Under the Patents Act 1990 as it currently stands, an invention cannot be patented if it was secretly used “before the priority date of that claim by, or on behalf of, or with the authority of” the owner or their predecessor.1 The rationale is usually said to be to prevent an unfair extension of the maximum patent term. Several defences to secret use however are provided in the form of activities that are “not to be taken to be secret use”:

(a) use for the purpose of reasonable trial or experiment only;
(b) use occurring solely in the course of a confidential disclosure;
(c) use for any other purpose other than the purpose of trade or commerce; and
(d) use by on or behalf of the Commonwealth, a State, or a Territory.

In this case the relevant defence is that the use was reasonable trial or experiment. Although Bradken contended that the provision of wagons to BHP was purely commercial in nature, there are two key aspects of Lynx’s conduct that meant that it was held to be “reasonable trial and experiment” and therefore not secret use:

(1) During testing, the intention was to improve the product and modifications were made to the wagons. Experimentation was held to be related to invention in the patent specification, although Bradken contended that the invention had ‘crystallised’ by the time the provisional application was filed and that subsequent transactions were commercial in nature. This was a curious argument to run however as the deliberations regarding secret use only arose because it was held that the provisional specification did not provide fair basis for the invention claimed in the complete application.

(2) There was no guarantee of income from the trial. BHP had not (before the priority date) placed an order for additional wagons and was not obliged to, even if the prototypes were deemed acceptable. The burden of financial risk was born by Lynx.

Permissible commercial benefit

It is clarified that the interpretation of “only” in “reasonable trial or experiment only” cannot be given an absolute meaning and some commercial benefit can exist. Indeed McKerracher J goes so far as to say that if this were not the case “there would almost never be an exception available … making the defence pointless”. It is interesting to note that it was deemed acceptable for BHP to be under contract to pay for the 3 prototypes if the trials were successful, and that it was permissible for Lynx to enter into a licensing agreement with Goninan, without such activity constituting secret use.

His honour also cites the previous Federal Court decision of Azuko, agreeing that manufacture before the priority date is not deemed to be a secret use.2 Nor is obtaining capital investment and agreeing to share profits.3 Citing relevant UK decisions, McKerracher J also noted that advertising in a US magazine was not an offer for sale in England but that distribution of samples to potential customers was held to be use. Citing another UK decision, his honour also noted that demonstrating a prototype to a prospective licensee was not held to be a use of the invention but that this may not be the case if a licence agreement had actually been signed.

Take-away messages

Additional testing and experimentation to ensure the invention works and to gain further insight into whether the invention will be of commercial benefit will not jeopardize a subsequently filed patent application.

Where there is real experimentation for the purposes of potentially modifying the product there is no secret use of the invention. Trial and evaluation should not however be purely for the purposes of soliciting a sale of the product.

Even prior commercial contracts may not be viewed as secret use depending on the overall context.

Post 15 April 2013 – ‘Raising the Bar’

The ‘Raising the Bar’ amendments will add a new defence that an activity is not secret use “for any purpose, if a complete application is made within the prescribed period”4 (emphasis added). The prescribed period is specified in the draft of the Intellectual Property Legislation Amendment Regulation 2012 to be from 12 months from the secret use. This will bring sub-section 18(1) of the Patents Act 1990 in line with the 12 month grace period for prior publication or public use of an invention.

This amendment will apply to any secret use of an invention from 15 April 2013. However, the existing provisions remain relevant for any secret use (i) prior to this date or (ii) after this date if a complete application is not filed within 12 months. The judicial observations discussed here will therefore remain relevant after the amendments come into affect in 2013.

Further information on the ‘Raising the Bar’ amendments can be found here.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.